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In 1993, the Keating government passed laws to move Australia towards a “system based primarily on bargaining at the workplace, with much less reliance on arbitration at the apex” (Laurie Brereton MP, Minister for Industrial Relations, 28 October 1993). The embrace of enterprise bargaining instead of industry-wide, centralised wage fixation was to be the end of a creaking “Australian settlement” that had been overtaken by modern values and economic reality.

Enterprise level bargaining has undoubtedly been a positive move away from the system that preceded it. Nevertheless, over 20 years since its introduction, an observer might feel skeptical about the promise of agreements that would be tailored to the needs of individual workplaces and their employees, under which “employees and employers alike can and will benefit”. It is not hard to find examples where enterprise bargaining’s ideals are being undermined by:

Sectoral bargaining. Many employers who have tried to strike genuinely enterprise-specific bargains will be familiar with variations of the phrase “this is the industry standard…”. The reality is that many terms and conditions of employment are set at an industry or sectoral level, sometimes with the cooperation of industry bodies, even if they are formalised in enterprise-level agreements.

The proliferation of “pattern” agreements. Unions can and do force businesses to sign up to slight variations of the same template enterprise agreement, a process repugnant to the idea that agreements are tailored to each enterprise. While unions cannot take industrial action to support “pattern bargaining”, the legislation is cast so narrowly as to offer little real protection against this practice.

Power based rather than interest based bargaining. The enterprise bargaining process often involves a “push/pull” exercise of debating claims in an oppositional way, rather than bargaining representatives workshopping creative ways of meeting their needs and desires in a way that is good for staff and the business. Indeed, once the nominal expiry date of an agreement has raised, employees and employers can inflict all sorts of legal damage on each other with strong legal immunities applying to the consequences of that behaviour. The levers within the system encourage rather than discourage oppositional based bargaining. The weak threshold requirements for the taking of protected industrial action do nothing to help the situation.

Highly technical rules for making agreements. Employers of all sizes have trouble complying with the scheme for bargaining in the Fair Work Act. These well-intentioned provisions have the effect that, for example, changing the mandatory notice issued to employees at the start of bargaining – even to fix the typos in the template! – can invalidate an agreement, regardless of whether any employee was actually disadvantaged. For many smaller businesses, this and many other potential pitfalls mean that bargaining isn’t worth the hassle. This leaves employers and employees with the default safety net: an industry-level modern award, with standard terms determined by a centralised authority.

So what can be done to put the theory of enterprise bargaining into practice? Taken in isolation, the problems above might be patched up through tweaks to the legislation: put in place stronger protections against sectoral or pattern bargaining; clean up problem industries such as building and construction; relax procedural rules and allow the Fair Work Commission to waive compliance where no harm has been done; or overlay a system of individual statutory agreement making, etc.

On the other hand, perhaps it is time for Australia to look at its policy settings more broadly and decide whether enterprise bargaining as we know it has had its time in the same way as centralised wage fixation ran its race over 20 years ago. This would require the same kind of vision and boldness that was shown decades ago when the system was changed for the better. It would involve looking holistically at the industrial relations system and alternative ways to meet the policy objectives which underpin the legislation. We should not rule out the idea that the system can evolve or be fundamentally altered for the better. History shows that it can be done when the right mix of ingredients are present.

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